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. Last Updated: 07/27/2016

Investors Urged to Take Heed

LONDON -- Foreign business leaders on Monday urged investors to take heed of Russia's newfound assertiveness -- a message that resounded at a London conference bereft of the country's top market movers.

"Over the last 10 years, not only the [Russian Economic] Forum has changed, but Russia has changed extraordinarily," said Hans-Jorg Rudloff, chairman of Barclays Capital.

Some 2,500 delegates swarmed the Queen Elizabeth II Conference Center in central London, hoping to pick out the few well-known business leaders from the many journalists and low-level bankers in the crowd.

Delegates and speakers alike explicitly recognized that the Kremlin had an active hand in discouraging federal officials and representatives of state-owned companies from attending the 10th Russian Economic Forum.

State Duma Deputy Alexander Lebedev, a regular at the forum, joked in his remarks: "Some people told me, 'You are the only one who was allowed to come [here], but will you be able to go back?'"

Once the event of the year for investors in Russia, the conference, which opened Sunday evening and wraps up Tuesday, showed the country was open for business to the everyday investor. But it also reflected a Russia increasingly determined to play by its own rules.

"Our mission is depleted by not having Russian officials or CEOs of state-owned companies," said Roger Munnings, president of KPMG Russia.

"Russia wishes to find its own way, with a democracy and market economy to suit its particular circumstances," he said.

Glossing over concerns over human rights and increased state authority in the country, speakers lauded an economy riding high after an unprecedented long growth cycle, sitting on $300 billion in foreign reserves and boasting low government debt and a single-figure inflation rate.

"It's a new Russia. A Russia which is self-assertive, a Russia proud of what's been achieved, a Russia whose economy is powering forward," Rudloff said.

Yet he warned that those days would not last.

"The developments of the past seven years are being rewarded excessively, and so will be penalized excessively," Rudloff said, adding that the downturn would come "in the near future."

The main threats, several speakers warned, were shortages in human capital and a failure to invest adequately in infrastructure.

"There is going to be a bottleneck in infrastructure ? that's the business for tomorrow in Russia," said Jean Lemierre, head of the European Bank for Reconstruction and Development.

"The profits from oil and gas shouldn't be used only to import consumer goods, but to invest and produce," he said. "Russia needs to invest more and be more open."

With officials from Rosneft and Gazprom canceling appearances at the last minute, the tone of the conference tended to steer away from the country's lucrative oil and gas sector.

In previous years, the conference's opening session has featured Gazprom deputy CEO Alexander Medvedev, Rosneft CEO Sergei Bogdanchikov and Semyon Vainshtok, head of the Transneft pipeline monopoly.

This year, Munnings and Lemiere were joined by Tatarstan Prime Minister Rustam Minnikhanov, Renaissance Capital chairman Chris Baxter and Rudloff, who sits on the Rosneft board but was not presented to the conference in that role.

Bogdanchikov canceled his appearance last week, and Rosneft CFO Peter O'Brien later nixed plans to read Bogdanchikov's speech to the conference.

Some delegates canceled as late as Saturday night, after conference programs were printed. Grigory Beryozkin, head of ESN Group, was scheduled as one of the forum's opening speakers but withdrew over the weekend, conference spokesman Jonti Small said.

Enel CEO Fulvio Conti also failed to show, amid reports that the Kremlin's chief of staff had telephoned delegates to discourage them from attending.

Rudloff praised President Vladimir Putin's strong hand, faulting journalists for presenting an unfairly harsh picture of the country. "Economic development is only possible in strict frame and order," he said, comparing contemporary Russia to post-World War II Europe.

"Let's move away from the consistent cheap criticism by many journalists who don't have the slightest idea what is going on in the country," he said.

In a question-and-answer session, a Dow Jones journalist accused Rudloff of failing to recognize various recent missteps in the country -- from the shutting off of gas through Belarus to the unsolved killings of journalists. His comment was met with loud applause from many of the 400 journalists in the audience. Rudloff's answer with an appeal to "be fair" was met by equally thunderous applause from Russian delegates and foreign investors in the hall.

"There is still an enormous amount of interest in Russia," said a foreigner banker. "There's that tension between obvious development and frustration; there are still vestiges of the old regime."

William Browder, head of Hermitage Capital Management, the largest portfolio investor in Russia, said he still views Russia as a growing market. "The major thing I see is the absolute flood of IPOs coming out of Russia. Russians are more interested in selling securities and the West has gotten confident buying," he said during a break. "I couldn't imagine 10 years ago that Russia would have $13 billion worth of IPOs."

The London Stock Exchange continues to be the Russians' market of choice, and Baxter, the RenCap chairman, said he expected the MICEX to match the world's major markets by 2017. "The opportunity is unquestionable, and only incompetence can cause it to be lost," he told the conference.

Yet Munnings and Lemierre -- both longtime Russia-watchers -- warned that Moscow must continue to look outward. "It's not by isolation that we make progress," Lemierre said.

Munnings echoed him: "Standoffs do not make progress."

Staff Writer Tim Wall contributed to this report.